INTRODUCTION: The production of functional alternatives to bone autografts and the development new treatment strategies for cartilage defects are great challenges that could be addressed by the field of tissue engineering. Umbilical cord mesenchymal stem cells (MSCs) can be used to produce cost-effective, atraumatic and possibly autologous bone and cartilage grafts.AREAS COVERED: MSCs can be isolated from umbilical cord Wharton's jelly, perivascular tissue and blood using various techniques. Those cells have been characterized and phenotypic similarities with bone marrow-derived MSCs (BM-MSCs) and embryonic stem cells have been found. Findings on their differentiation into the osteogenic and chondrogenic lineage differ between studies and are not as consistent as for BM-MSCs.EXPERT OPINION: MSCs from umbilical cords have to be more extensively studied and the mechanisms underlying their differentiation have to be clarified. To date, they seem to be an attractive alternative to BM-MSCs. However, further research with suitable scaffolds and growth factors as well as with novel scaffold fabrication and culture technology should be conducted before they are introduced to clinical practice and replace BM-MSCs.